IPOs generate a lot of interest among investors. In this year, we have already seen more IPOs than the entire year of 2020. After the Zomato IPO frenzy, investors are looking forward to Paytm, MobiKwik and other IPOs that will hit the market in 2021. 

Do you want to invest in IPO? Here are some aspects that you may look at before investing in IPO.  

Be selective 

The stock market, including the primary market, experiences its ups and downs. But as several IPOs hit the market, there may be a few rotten eggs as well. So, it is best not to speculate on all the IPOs hitting the markets. Instead, be selective and choose wisely. Try focusing on businesses that you genuinely believe in or companies that have the potential to deliver excellent results in the future.

It is still riskier 

Do you think investing in an IPO is safer because you are buying shares from the company or at a discount? Then think again. 

Investing in an IPO can be riskier than investing in the secondary market. The first reason is that the information publicly available for a company hitting the primary market is way less than the information and data that we can find about the already listed companies. The second reason is that the company’s performance will depend mainly on the current market situation, making it highly risky. 

We see IPOs give better returns when the equity markets are optimistic and vice versa.   

Do your analysis

Investing in IPOs is a common topic of discussion among colleagues. But that doesn’t mean that you can invest in IPO by listening to your colleagues who make you believe that they have continuously gained at least 100% by investing in an IPO. 

As it can be a risky investment option, you must carry out analysis without being biased.    

Quality of promoters and key management team, future projections of the industry, and positioning of the company within the sector are essential factors that you need to consider. 

If you don’t have the skills to analyse a company, look at the research reports published by reputed research firms.   


Firms with weak fundamentals, high-priced fundamentally strong companies, and reasonably priced fundamentally strong companies are the three types of companies that typically employ the IPO method. Another aspect that you need to focus on is the company’s valuation. 

It is best to compare the company’s valuations with listed peers and invest in the IPO if it is available at a discount. 

The reason behind going public

The next point for investors is to find out the company’s reasons for going public. 

It is a matter of concern as many venture capitalists (VCs) and private equity investors (PEs) rely on IPOs to exit their investments and generate a handsome profit.

Existing investors exiting the company in the secondary market is not a good sign. 

Stay invested 

Many individuals tend to sell their shares after the IPO gets listed. If the company has the potential to generate high returns over the long term and you sell your shares, you may not be able to gain from the long-term performance of the stock.


Investing in IPO can give attractive returns if you select the right IPO and stay invested for the long term. This article has considered the six scenarios that you need to examine before investing in an IPO.

Should You Invest in IPO?

What is Lorem Ipsum? Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry’s standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries, but also the leap into electronic typesetting, remaining essentially unchanged. It was popularised in the 1960s with the release of Letraset sheets containing Lorem Ipsum passages, and more recently with desktop publishing software like Aldus PageMaker including versions of Lorem Ipsum.

Why do we use it? It is a long-established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem Ipsum will uncover many websites still in their infancy. Various versions have evolved over the years, sometimes by accident, sometimes on purpose (injected humour and the like).

Where does it come from? Contrary to popular belief, Lorem Ipsum is not simply random text. It has roots in a piece of classical Latin literature from 45 BC, making it over 2000 years old. Richard McClintock, a Latin professor at Hampden-Sydney College in Virginia, looked up one of the more obscure Latin words, consectetur, from a Lorem Ipsum passage, and going through the cites of the word in classical literature, discovered the undoubtable source. Lorem Ipsum comes from sections 1.10.32 and 1.10.33 of “de Finibus Bonorum et Malorum” (The Extremes of Good and Evil) by Cicero, written in 45 BC. This book is a treatise on the theory of ethics, very popular during the Renaissance. The first line of Lorem Ipsum, “Lorem ipsum dolor sit amet..”, comes from a line in section 1.10.32.

The standard chunk of Lorem Ipsum used since the 1500s is reproduced below for those interested. Sections 1.10.32 and 1.10.33 from “de Finibus Bonorum et Malorum” by Cicero are also reproduced in their exact original form, accompanied by English versions from the 1914 translation by H. Rackham.

No posts found!